No, Seriously: When Will Gas Prices Drop?

September 11, 2012

A month ago, Americans paid an average of $3.69 for a gallon of unleaded regular gasoline. Today, we're paying $3.84. 

What gives? Isn't this the time of year when gas prices are supposed to drop -- when companies stop manufacturing expensive summer-blend fuel and transition to more affordable winter blend?

Ordinarily, yes, but this year, we've hit a couple of speed bumps.

The biggest of those bumps was Hurricane Isaac. On the Saffir-Simpson scale, Isaac was a fairly minor storm, far less powerful than monster hurricanes like Katrina or -- for those of a certain age -- Camille. 

However, Isaac did its best to disrupt oil production in the Gulf of Mexico, which made analysts worry.

And that's where the problem lies, because ultimately, analysts' fears and enthusiasm hold far more sway over oil and gas prices than they should. After all, the Gulf of Mexico isn't the only place where oil is extracted, and Southern states like Louisiana and Mississippi aren't the only places where it's refined. But when analysts see a giant, swirling, meteorological mass in the Gulf, they often panic, and the rest of us pay for it at the pump.

It didn't help that Isaac hit just before Labor Day weekend. Shutting down oil rigs and refineries during a major travel holiday caused fuel prices to climb further than they might've if Issac had struck a week later.

The good news is that many of the Gulf's rigs and refineries are up and running again, which should calm analysts' nerves and bring gas prices down. The first to see relief will be those who live closest to the refineries in the Deep South. Folks in the far West, northern Midwest, and New England, will have to wait a bit longer.

But we're not entirely out of the woods yet. The earliest on-sale date for winter-blend gasoline is this Saturday, September 15, but temperatures have been remarkably high this summer, breaking all-time records in many places. (FWIW, Wisconsin got the worst of it, followed by Iowa, Missouri, Indiana, and Minnesota.) Though some areas have seen the mercury dip in recent days, high temps may linger in other parts of the U.S., which could delay the roll-out of winter blend.

We can also blame Isaac for that delay: fuel companies produced a lot of summer-blend gasoline, and Isaac disrupted their ability to distribute it. Until it's used up, most companies won't make the switch to winter-blend gasoline. (Unlike summer-blend, which has to be on sale everywhere by June 1, it doesn't appear that winter-blend has a mandatory on-sale date.)

Have gas prices begun to slip in your neck of the woods yet? Drop us a line, or leave a note in the comments below.

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